JET AIRWAYS WILL BE THE FIRST AIRLINE TO GO UNDER LIQUIDATION IN INDEPENDENT INDIA (BY COMPULSORY LIQUIDATION)

 JET AIRWAYS WILL BE THE FIRST AIRLINE TO GO UNDER LIQUIDATION IN INDEPENDENT INDIA (BY COMPULSORY LIQUIDATION, UNDER THE ORDER OF SUPREME COURT)


Dear Readers. 
The News Reports in Public Domain today say that the Hon'ble Supreme Court of India has Ordered Liquidation of Jet Airways today (on 07-November-2024).

I am giving a link of the News Report of The Economic Times, however there are many on this subject in the Public Domain you can also read by your choice to understand it rightly:

Supreme Court orders liquidation of Jet Airways on failure of resolution plan

Jet Airways, once upon a time was the most prominent Airline of India, even surpassing the then public sector Air India at its time. Jet Airways will be the first Airline to go finally for Liquidation in the Independent India. It is unfortunate that  the Jet Airways as one of the first generation Airlines of India, having even acquired the most prominence during its operations inside India and Internationally as well, and even it had acquired the "Sahara Airlines' during its operational life time, however as the news reports say, the Hon'ble Supreme Court has observed that there was no choice as the Resolution Plan could not go through as mandated, and the major Creditors such as State Bank of India and Punjab National Bank, the Public Sector Banks (Lenders) finally applied for Liquidation of the said Airline Company.

Now the Liquidation Process under the Order of the Hon'ble Supreme Court of India for Jet Airways will be called as : Compulsory Liquidation, as the Liquidation has been Ordered by Hon'ble Supreme Court, and the Liquidation Process will have to go through Appointment of an Official Liquidator under the Supervision of Local Courts such as NCLT (National Company Law Tribunal).
Those who want to know more about different types of Liquidation of Companies, can spend some time in internet to understand the Process of Voluntary Liquidation and Compulsory Liquidation.

Under the Compulsory Liquidation that Jet Airways has to go through, its Assets will be sold by an Official Liquidator to be formally appointed, who will for all purposes convert the assets into cash by sales process and distribute the realized proceeds by the following order of priority Class of Creditors as per existing Indian Liquidation Norms and Law:

1.    Liquidator Fees and Expenses .....The Official Liquidator Appointed to carry out the liquidation Process will have to be paid for their Fees and Expenses as the Top-Priority

2.    Secured Creditors with Fixed Charge ... This class of Creditors are like Banks who have given loans against securing charge of designated assets.

3.    Preferential Creditors and Prescribed Part Creditors ( will include Govt Dues also) ..... This Class is Primarily the Unpaid Wages of the Employees, Employees' Dues of other types payable, statutory payments like dues to Tax Agencies, Employees' Pension contribution dues etc.

4.    Secured Creditors with Floating Charge.........This class is primarily the Creditors not having fixed charge against specific assets, but will have floating charge on assets like Stock, Raw Material and Product Inventory, work-in-progress, fitting and fixtures etc.

5.    Unsecured Creditors ...... This class will include the Suppliers, Customers, Contractors and some claims of even employees that are not of the nature of wages and social security kind of schemes.

6.   Unsecured Connected Creditors. .... In this case the creditors are those who are associated to the Company, like Director's family or Employees who have given loans to the Company Business, Payable Travelling Expenses of Employees can fall in this category. 

7.  Shareholders --- They are treated as the Last Order Class of Creditors. They can get anything from the Proceeds of the Liquidated Assets of the company only after all classes in above-order are completely paid.

The Order of Priority of Payments from the Proceeds of the Liquidated Assets of the Company will be followed by the Official Liquidator from Top Order Class, and only after a Higher Order Class of Creditors are Paid Completely, there can be chance of payments to the Next  Order Class of Creditors.

Let me share with you, I was working for an Indian Company for some years, who were selling the products in USA. One of such customers of USA had gone for liquidation under insolvency proceeding in USA. Since the Indian company had sold the products to that customer company and there were unpaid dues, the Indian company was treated in the class of Unsecured Creditors in that case, and nothing of the unpaid dues got realized as the sales proceeds of the assets of that customer company under liquidation were finished before it could reach the unsecured creditor class ( the 5th Order Class as you see above).  ..... Let me also make clear ... I did not sell the products to that USA Company ... it was aggressively sold by some other people before even I arrived in that company.

I was assigned to deal with this subject then to see if the Indian Company can get anything during that liquidation proceeding in USA being in unsecured creditors class, I used to deal with the Attorneys who were handling it in USA and had enough exposure to know how it worked then. The process more or less is being adopted in India legally now a days.

Just shared with you out of my experience for your benefit. If it can help some of you in understanding the dynamics of it, whether anyone of young or old or younger generation, I made my day.

With best regards,
Dr. Nimain Charan Biswal,
Mumbai, India


About the Author: Dr. Nimain Charan Biswal is a B.Sc.(Agri. Science and Technology), M.B.A. and Ph.D.(Management Area ) by qualifications; and he has 38+ years of work experience in both industrial and development sectors in diversified fields of social importance. He has been educated at Orissa University of Agriculture and Technology (OUAT)-Bhubaneswar, Institute of Rural Management Anand (IRMA) and Gujarat University (with Resource Support of IIM-Ahmedabad). He is further educated at IIM-Calcutta, XLRI-Jamshedpur, Apple Computer Industries and Spar Inc., USA. He has worked for reputed National and International Organizations in Senior/Top Management Capacities at Board level as well as Managing Director and CEO. He is a management expert covering extensive areas from management in industrial sectors, management in agriculture and dairy, development management to management of public systems. He is a prominent professional of India and known Internationally as well. He is also a Political Strategist. He lives at Mumbai in India.

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